The coronavirus has devastated many small businesses. Historically, ownership offered a solid if not prosperous choice for many white males, particularly in the postwar period. You can see evidence of their successes on golf courses, in retirement communities and on cruise lines. While white men still dominate the business-owning class, other demographic groups have a strong small business presence, particularly in immigrant-rich cities like New York. These groups are especially vulnerable to the economic impact of the coronavirus lockdown.
The black business community has expanded substantially in recent years. The latest comprehensive government statistics, from 2012, estimate that there was a one-third increase from the census of 2007. The proportion of black business ownership matches the proportion in the Latino community and is three-quarters of the national rate. This would suggest that black Americans have a growing and substantial presence in the small-business community. And that is how the New York Times interprets these numbers:
‘A survey of business owners by the Census Bureau reported a substantial jump in the number of black-owned businesses nationwide between 2007 and 2012, to 2.6 million from 1.9 million.’
The problem is that the census includes all businesses that have as little as $1,000 in gross sales receipts. Among the 95.8 percent of black businesses that had no employees, average gross receipts were less than $19,000. The low sales reflect the fact that these businesses are overwhelmingly part-time endeavors meant to supplement household incomes. They pay no rent or other fixed costs. These are not the kind of enterprises that are suffering devastating losses today.
A more accurate assessment would focus on businesses that have paid employees. Only 4.2 percent of black businesses have paid employees and their numbers grew by only 2.4 percent between the censuses of 2007 and 2012. In New York City, their numbers actually declined. Despite the small business boom, the black share of businesses declined substantially, particularly in the Bronx and Queens. Nationally, black firms comprise only 2.0 percent of all businesses with paid employees and have much lower sales receipts than other groups’ businesses. Thus, the footprint of black enterprise in the US economy is marginal and so too will be the losses from this pandemic.
By contrast, the average gross receipts among Latino businesses without employees were just over $31,000. For many families this represents a substantial portion of income. Latino firms with paid employees grew by 15.6 percent between 2007 and 2012 and comprised 8.7 percent of all Latino businesses. Moreover, there are more than 2.5 times as many Latino as black businesses with paid employees. Since many employees of these Latino businesses are also Latinos, we can imagine how damaging the pandemic can be to Latino communities.
The devastation may be even greater in Asian immigrant communities. A business owner dwells in over 10 percent of all Asian families. Businesses with no employees averaged $50,000 income in the 2012 census. Asian businesses are also much more likely to have paid employees: 26.3 percent and 36.5 percent among Chinese and Asian Indian businesses, respectively. Overall, Asian groups have more than four times as many businesses with employees as black Americans, even though the Asian population is only one-third the size.
The literature on why there are few black businesses is contentious. While it is often claimed that it results from a lack of access to investment funds, the evidence is problematic. There are cultural reasons why small business has a much greater presence in immigrant rather than black communities. Immigrants are more comfortable shopping in businesses where they can use their native language and buy products specific to their culture or religion. By contrast, black Americans lack these linguistic or cultural distinctions, so black business owners do not have a ‘captive’ clientele, save for products and services related to personal grooming. Thus, while immigrant grocery stores are ubiquitous in immigrant communities, there are only a few black-owned supermarkets nationally and none at all in Detroit.
In addition, immigrant cuisines are desired by a broad section of the population. As authenticity is desired, they are offered almost exclusively by immigrants themselves. By contrast, black cuisine is only a modest variation of Southern American cuisine, so there is little market for black-owned restaurants serving black cuisine.
These immigrant enterprises have served their communities, providing a launching pad for the upward-mobility of their children. Hopefully, the overall impact on immigrant businesses and their workers may not be catastrophic. Their restaurants have been hard hit, but it is possible that their grocery and product stores will fare better. Only time will tell.
Robert Cherry is a recently retired professor of economics at Brooklyn College.